Oklahoma Series LLCs
Separating and dividing assets is one of the best ways to protect yourself from both liability and “dangerous” assets. For example, if you have a high-litigation/liability asset (such as a gas station), that asset needs to be separate and distinct from your personal assets (home, personal bank accounts etc).
A relatively new design to Oklahoma, Series LLCs are a method to go about doing just that: separation for the purpose of protection.
Classically, if you have 10 rental properties, each of those properties should be in 10 separate legal entities. However, Series LLCs do provide a couple of benefits over the classic LLC: (a) only one tax filing (talk to a certified public accountant); (b) limited starting costs since you only have to file one articles of organization; (c) and acting as a division for business operations (i.e. various product lines each under a series or various rental properties). For rental properties, you would have one LLC (John Smith’s Rental LLC) with 10 different series within (each for a property). HOWEVER! Remember that co-mingling is a massive issue. If you have 10 series, but all that rental income goes into one account, it will be “limited liability” in name only. Not all is golden! In order to ensure a series LLC maintains its limited liability, there are a couple of requirements:
(1) The intial LLC’s articles of organization (documents creating the LLC) need to contain a series limitation clause. The clause is quite complex so it does require an attorney to draft it. DO NOT rely on online forms for this.
(2) The Different Series NEED to be completely separate entities. Each series must have its own bank account, assets, liabilities, and records. Co-mingling in between personal & series will lose its “separate” and “limited liability” status through a legal tactic called “piercing the corporate veil.” Essentially, if an attorney can prove that they are not, in fact, separate entities, then limited liability disappears. Common examples include personal/business expenses charged against the wrong account/card OR signatures done as an individual but should have been as a manager.